The HSR and standard-gauge floor of Bang Sue might remain unused for the next few years. It is taking quite a while with regards to the HSR constructions in Thailand.
China's infrastructure projects and strategic implications
- Thread starter tphuang
- Start date
Yes still looks like early phase. The route through Malaysia to Singapore would probably take even longer. Probably more like Post 2030. In Malaysia I think they initially scrapped the plan in 2018 because of their own internal politics (and Anti-China sentiment) but I think they're going to start it up again.
However, the thing is Laos got the first operational HSR, and now Thailand is getting theirs build too. Now neighboring countries like Malaysia will feel like they're missing out and want HSR.
Maybe trains (the 160kph and 250 kph Fuxin ones) could start running between Bangkok and Kunming by late 2020s.
Fundamentally, BRI is a massive project that intends to transform a world that is centered around Europe/America into one that's centered around China. While the idea of new Silk Road would make one since this is just in tended to improve infrastructure from China to countries in the West. It is actually also intended to have all world commerce go through China.
For example, you start by shipping large quantities copper and lithium from Santiago Chile to Shanghai. It gets processed and transported via rail to a plant in China to be processed. Then, those metals can either get transported to BYD/CATL to be used in a battery or sent to a Chinese battery plant in Germany/Hungary via rail + shipping and eventually gets installed in a Mercedes factory. This process allows China to further ingrain itself in the supply chain. As such, even if China is the end point of each individual "Silk Road", it is the center of the action. Think of this from the perspective of a large airline like Emirates. They connect to a bunch of people from different part of the world that transits through Dubai to other parts of the world. Although the direct route is faster, the convenience of going through Dubai and the efficiency of the travel encourages people to make the 1 stop in Dubai. In my example, the end product is that raw materials to be used in a battery eventually ends up in a German made car that gets sold to German car. However, Chinese companies get to take a cut along the way from the shipping, to the port in Shanghai, to the railway company, to the copper/lithium processing factory, to CATL and to all the workers involved along the way in the silk route to Europe. On the surface of it, this is ultra inefficient. Why not just have the ship dock at Santiago, go through Panama Canal and land in Rotterdam, get processed in Netherland or Germany and then shipped to a German battery factory before ending up in Mercedes? In order to participate in this transaction, China has to invest the money to make this entire process smooth.
That's why you see China invest heavy amount of money in Panama Canal, in Chancay port in Peru and possible port expansion in Santiago. It doesn't make sense for China invest in ports in Bueno Aires or Rio. It would make sense for China to invest in rail project from Argentina/Brazil to the ports on the west coast of South America. Everything needs to be done in a way to facilitate Chines economy. In some cases like export of cars from Japan to Kazakhstan, China is only involved in handling the shipping and rail. Another scenario would be a Chinese company setting up a clothing factory in Pakistan or Bangladesh. This company imports cotton from America or buys locally and then sends that to its factory outside of China and then having the end product rail freighted back through China and shipped to America or Australia. So in this case, China can move up the value chain while utilizing all the BRI infrastructure. In other cases like the Mercedes car, all of China's industries are involved along the way. All this investment only makes sense if China can remain competitive across all the industries and if they can remain efficient in building stuff. I think both are reasonable assumptions even if Chinese labor costs go up. It would also require China to continue invest in mining projects so that those minerals get sent to China for processing rather than Europe or America.
All of the above is about economic security for China. There is also a physical security angle to this that I've talked about above. China is investing a lot in Asia so that in the event a war breaks out, it can continue to operate even if the sea lanes get cut off by its adversaries. As such, it has the near term goal of securing resources across rail and short shipping lanes to Russia Far East and ASEN countries. This does not require them to have more military capability than they currently have. A medium term goal of utilizing ports in Pakistan/Myanmar/Iran to short circuit shipping through chokepoints in second island chain. This may require them to be able to have military base in friendly countries like Pakistan/Myanmar. The longer term goal would be to protect their own shipping lanes across Pacific Ocean and Indian Ocean. That's where possible naval bases in places like Solomon Island and Vanuatu would come into play.
A final strategic implication here is banking/finance security. China is already the largest trading partner for most countries in the world. BRI allows China to further increase its trading with these countries. We've already seen an increase in usage of Yuan with Russia. Over time, foreign companies that deal with China can be pressured to accept payments in Yuan instead of USD. They can be pressured to work with Chinese banks instead of Western banks. They can be encouraged to issue bonds in Yuan instead of USD. All of these things will create jobs in China's banking sector. It seems to me that the thinkers in Beijing are still a little too conservative on this front.
For example, you start by shipping large quantities copper and lithium from Santiago Chile to Shanghai. It gets processed and transported via rail to a plant in China to be processed. Then, those metals can either get transported to BYD/CATL to be used in a battery or sent to a Chinese battery plant in Germany/Hungary via rail + shipping and eventually gets installed in a Mercedes factory. This process allows China to further ingrain itself in the supply chain. As such, even if China is the end point of each individual "Silk Road", it is the center of the action. Think of this from the perspective of a large airline like Emirates. They connect to a bunch of people from different part of the world that transits through Dubai to other parts of the world. Although the direct route is faster, the convenience of going through Dubai and the efficiency of the travel encourages people to make the 1 stop in Dubai. In my example, the end product is that raw materials to be used in a battery eventually ends up in a German made car that gets sold to German car. However, Chinese companies get to take a cut along the way from the shipping, to the port in Shanghai, to the railway company, to the copper/lithium processing factory, to CATL and to all the workers involved along the way in the silk route to Europe. On the surface of it, this is ultra inefficient. Why not just have the ship dock at Santiago, go through Panama Canal and land in Rotterdam, get processed in Netherland or Germany and then shipped to a German battery factory before ending up in Mercedes? In order to participate in this transaction, China has to invest the money to make this entire process smooth.
That's why you see China invest heavy amount of money in Panama Canal, in Chancay port in Peru and possible port expansion in Santiago. It doesn't make sense for China invest in ports in Bueno Aires or Rio. It would make sense for China to invest in rail project from Argentina/Brazil to the ports on the west coast of South America. Everything needs to be done in a way to facilitate Chines economy. In some cases like export of cars from Japan to Kazakhstan, China is only involved in handling the shipping and rail. Another scenario would be a Chinese company setting up a clothing factory in Pakistan or Bangladesh. This company imports cotton from America or buys locally and then sends that to its factory outside of China and then having the end product rail freighted back through China and shipped to America or Australia. So in this case, China can move up the value chain while utilizing all the BRI infrastructure. In other cases like the Mercedes car, all of China's industries are involved along the way. All this investment only makes sense if China can remain competitive across all the industries and if they can remain efficient in building stuff. I think both are reasonable assumptions even if Chinese labor costs go up. It would also require China to continue invest in mining projects so that those minerals get sent to China for processing rather than Europe or America.
All of the above is about economic security for China. There is also a physical security angle to this that I've talked about above. China is investing a lot in Asia so that in the event a war breaks out, it can continue to operate even if the sea lanes get cut off by its adversaries. As such, it has the near term goal of securing resources across rail and short shipping lanes to Russia Far East and ASEN countries. This does not require them to have more military capability than they currently have. A medium term goal of utilizing ports in Pakistan/Myanmar/Iran to short circuit shipping through chokepoints in second island chain. This may require them to be able to have military base in friendly countries like Pakistan/Myanmar. The longer term goal would be to protect their own shipping lanes across Pacific Ocean and Indian Ocean. That's where possible naval bases in places like Solomon Island and Vanuatu would come into play.
A final strategic implication here is banking/finance security. China is already the largest trading partner for most countries in the world. BRI allows China to further increase its trading with these countries. We've already seen an increase in usage of Yuan with Russia. Over time, foreign companies that deal with China can be pressured to accept payments in Yuan instead of USD. They can be pressured to work with Chinese banks instead of Western banks. They can be encouraged to issue bonds in Yuan instead of USD. All of these things will create jobs in China's banking sector. It seems to me that the thinkers in Beijing are still a little too conservative on this front.
The other factor I want to look at is CPEC. It's really hard for me to get a proper gage of how well the projects are going. All the Indian and American articles would typically trash the various projects involved here. The Chinese and Pakistani articles are quite encouraging. I do get the sense that the progress here hasn't been as quick as China had hoped.
The Gwadar project seems to be behind schedule. Just looking at the list of projects here. Only 4 out of 14 projects have completed thus far. That's not all that encouraging for something that started probably in 2016.
Similarly, only about 6 out of 24 projects have completed thus far.
It does seem like the energy project are doing better with 11 out of 21 completed and another 5 that are probably a year from finishing.
So while a lot of money have already been spent here, it does seem like a lot more needs to be spent. In the case of Gwadar, it would be hard for it to flourish without having desalination plant, water treatment, power stations and hospital working. I'm not convinced they actually need an airport, but the money has gone in there.
On top of that, security issues and protests are quite common along this project. While complaints/protests are common in BRI projects due to certain displacement of native population, they do seem to be at a higher level in Gwadar. It seems to me that people involved in CPEC needs to complete some of these projects sooner so that they can show economic benefits to locals.
Even so, Gwadar itself is still at a great location near the Persian Gulf as a point of connection between the Middle East and Africa to China.
For example, a project like this would be something you want in Gwadar, but more infrastructure is needed to improve the efficiency of supply chain onward to China.
Just as importantly, Gwadar will need to be used for Pakistani import/export like wheat
and by other countries that can connect to Gwadar. For example, this route from Uzebekistan through Afghanistan to Pakistan will allow export from China/Russia/Kazakhstan/Uzebekistan to reach Indian Ocean through rail in a very efficient route.
It appears to me that you are not going to generate enough economic activity with just the China traffic. Gwadar is also sharing traffic with Karachi. As such, the only way to get Gwadar to work long term is to connect it to rest of Pakistan by convenient rail and Highway so that transportation to Central Asia is convenient.
It's not surprising that they want to bring Afghanistan into this project. Afghanistan allows them to connect Pakistan to Central Asia and then to China through rail. The mountainous border between China and Pakistan makes any rail project really difficult with dubious economic benefits. It would allow miners in Afghanistan to export their minerals through Pakistan.
Ultimately, CPEC seems to be at a critical point. It needs to finish more of the ongoing projects in order to attract enough economic activity. If it does not attract enough activity, then all the investment are wasted.
The Gwadar project seems to be behind schedule. Just looking at the list of projects here. Only 4 out of 14 projects have completed thus far. That's not all that encouraging for something that started probably in 2016.
Similarly, only about 6 out of 24 projects have completed thus far.
It does seem like the energy project are doing better with 11 out of 21 completed and another 5 that are probably a year from finishing.
So while a lot of money have already been spent here, it does seem like a lot more needs to be spent. In the case of Gwadar, it would be hard for it to flourish without having desalination plant, water treatment, power stations and hospital working. I'm not convinced they actually need an airport, but the money has gone in there.
On top of that, security issues and protests are quite common along this project. While complaints/protests are common in BRI projects due to certain displacement of native population, they do seem to be at a higher level in Gwadar. It seems to me that people involved in CPEC needs to complete some of these projects sooner so that they can show economic benefits to locals.
Even so, Gwadar itself is still at a great location near the Persian Gulf as a point of connection between the Middle East and Africa to China.
For example, a project like this would be something you want in Gwadar, but more infrastructure is needed to improve the efficiency of supply chain onward to China.
Just as importantly, Gwadar will need to be used for Pakistani import/export like wheat
and by other countries that can connect to Gwadar. For example, this route from Uzebekistan through Afghanistan to Pakistan will allow export from China/Russia/Kazakhstan/Uzebekistan to reach Indian Ocean through rail in a very efficient route.
It appears to me that you are not going to generate enough economic activity with just the China traffic. Gwadar is also sharing traffic with Karachi. As such, the only way to get Gwadar to work long term is to connect it to rest of Pakistan by convenient rail and Highway so that transportation to Central Asia is convenient.
It's not surprising that they want to bring Afghanistan into this project. Afghanistan allows them to connect Pakistan to Central Asia and then to China through rail. The mountainous border between China and Pakistan makes any rail project really difficult with dubious economic benefits. It would allow miners in Afghanistan to export their minerals through Pakistan.
Ultimately, CPEC seems to be at a critical point. It needs to finish more of the ongoing projects in order to attract enough economic activity. If it does not attract enough activity, then all the investment are wasted.
As we discussed here, Central Asia is an extremely important of BRI projects. In fact, they have been the largest beneficiaries of BRI projects, since the infrastructure projects allow them direct access to Europe through rail (without going through Russia), to East coast of China through rail (for trade across Pacific and to East Asia), to Indian Ocean (for trade with Africa and the Middle East). Once all the BRI projects are completed, Central Asian countries will be more connected economically and efficiently with the rest of the world than it has ever been. they will also be able to collect all the transit fees through their countries.
A key aim of BRI has to be to get Central Asian Stans and Russia to use Yuan as the primary currency of trade rather than USD. With China quickly becoming the de facto international reserve currency for Russia, it makes absolute sense
As seen below, there is a lot of shared interest. Maintaining stability in Xinjiang is a major one. Getting Afghanistan involved is another one. Many of the stans find so much business opportunity from these infrastructure project that China won't even have to be involved in financing.
For example, the much talked about CKU railway may get signed up in September. One of the keys of BRI is to create multiple efficient transport options. The more rail ways lines are available, the more efficient products are transported.
All this convenient transport built for other purposes have allowed China to do massive amount of exporting of finished product to the Stans.
And over time, China brings enough benefit to Central Asia that it becomes the preferred partner and dominate the region.
A key aim of BRI has to be to get Central Asian Stans and Russia to use Yuan as the primary currency of trade rather than USD. With China quickly becoming the de facto international reserve currency for Russia, it makes absolute sense
As seen below, there is a lot of shared interest. Maintaining stability in Xinjiang is a major one. Getting Afghanistan involved is another one. Many of the stans find so much business opportunity from these infrastructure project that China won't even have to be involved in financing.
For example, the much talked about CKU railway may get signed up in September. One of the keys of BRI is to create multiple efficient transport options. The more rail ways lines are available, the more efficient products are transported.
All this convenient transport built for other purposes have allowed China to do massive amount of exporting of finished product to the Stans.
And over time, China brings enough benefit to Central Asia that it becomes the preferred partner and dominate the region.
Thanks for sharing. What a strange conclusion to this article:
How did the author come to that conclusion? If he means the Russia-Ukraine war impeding development, well, that won't last forever. The new rail routes thru Central Asia will take years to build out anyway.
More on BRI and ASEAN countries recently. Improving infrastructure as part of BRI is a critical component in success of RCEP over time.
This should not surprise anyone. Chinese businesses prefer BRI projects in ASEAN countries. Given what we've seen with BYD and xiaomi moving phone/parts production in Vietnam, it shouldn't be a surprise that Vietnam is top here. There are some stories of running out of available labor in Vietnam
When it comes to Vietnam, the rail network to China keeps getting better. We know Xi'an as a major BRI center so it makes sense to connect it to Vietnam directly. Notice, how this has all enabled more freight from Europe/Central Asia to Vietnam? The goal here is to obviously make these rail routes so efficient that business in Europe/Vietnam will always try to use BRI rails first.
Seeing the same reports through the new China/Laos line. Although Laos rail is also trying to connect China with Thailand/Malaysia/Singapore more easily.
Here is the beauty of the new ILSTC through Chongqing. ASEAN countries can facilitate much faster/efficient freight services to Europe with the China-Europe express route
Just to show how much the port portion of this also gets used along ILSTC. So, 10k sea-rail trip in the first 4 years and another 10k sea-rail trip in just the last 487 days.
The importance here is to build larger ports capable of more transportation over time that will continue to facilitate trading through RCEP. Even if they successfully build the rail to Singapore, there is still significant traffic from Western China and Central Asia to Phillippines and Indonesia and Borneo.
The entire BRI projects is a huge growth engine for Western China. Chongqing is highlighted here, but Xi'an, Xinjiang and Yunnan are all major parts of this. It's not a good idea for everyone in China to crowd in the Eastern coastal provinces.
Interesting look here at the expanding high speed rail push in ASEAN countries courtesy of encouragement from China and "fear of missing out". Specifically, building these rail will inevitably utilize Chinese technology and facilitate great link between China and all of the land bound ASEAN countries.
And the other end of this is even connecting into Nepal. I guess the next step here is to expand rail into India. I'm not sure India will want that, since that will just end up with India running an even large trading deficit to China. As of now, the more convenient but longer route of going through Central Asia is more likely. That avoids the really mountainous regions of Himalayan mountains.
This should not surprise anyone. Chinese businesses prefer BRI projects in ASEAN countries. Given what we've seen with BYD and xiaomi moving phone/parts production in Vietnam, it shouldn't be a surprise that Vietnam is top here. There are some stories of running out of available labor in Vietnam
When it comes to Vietnam, the rail network to China keeps getting better. We know Xi'an as a major BRI center so it makes sense to connect it to Vietnam directly. Notice, how this has all enabled more freight from Europe/Central Asia to Vietnam? The goal here is to obviously make these rail routes so efficient that business in Europe/Vietnam will always try to use BRI rails first.
Seeing the same reports through the new China/Laos line. Although Laos rail is also trying to connect China with Thailand/Malaysia/Singapore more easily.
Here is the beauty of the new ILSTC through Chongqing. ASEAN countries can facilitate much faster/efficient freight services to Europe with the China-Europe express route
Just to show how much the port portion of this also gets used along ILSTC. So, 10k sea-rail trip in the first 4 years and another 10k sea-rail trip in just the last 487 days.
The importance here is to build larger ports capable of more transportation over time that will continue to facilitate trading through RCEP. Even if they successfully build the rail to Singapore, there is still significant traffic from Western China and Central Asia to Phillippines and Indonesia and Borneo.
The entire BRI projects is a huge growth engine for Western China. Chongqing is highlighted here, but Xi'an, Xinjiang and Yunnan are all major parts of this. It's not a good idea for everyone in China to crowd in the Eastern coastal provinces.
Interesting look here at the expanding high speed rail push in ASEAN countries courtesy of encouragement from China and "fear of missing out". Specifically, building these rail will inevitably utilize Chinese technology and facilitate great link between China and all of the land bound ASEAN countries.
And the other end of this is even connecting into Nepal. I guess the next step here is to expand rail into India. I'm not sure India will want that, since that will just end up with India running an even large trading deficit to China. As of now, the more convenient but longer route of going through Central Asia is more likely. That avoids the really mountainous regions of Himalayan mountains.
Now for the connections to Europe.
I guess the Europeans are catching on to what BRI is really about. It is just a railway from China to Europe. It is about getting all commerce in the world to flow through China. Building the infrastructure for that takes time. Western countries have spent decades slowly building up links between themselves and occasionally with each other. They are not used to stuff all running through China. Here is the key.
Meanwhile, the rail freight between China and Europe continue to do well. 10k freight so far this year.
They were at over 7k (up 2% YoY) in first half despite Russian/Ukraine conflict and China's lockdown. Indeed, the NILSTC through Chongqing saw 33% more traffic. That is huge for west china to ASEAN countries.
This talks about the Middle Corridor route that became popular after the Russian invasion. From what I can see, this is just a less efficient path right now due to more countries, the presence of passing through Caspian Sea and going through bosphorus straits. These will always be kind of problematic. I do wonder if they can build rail across Caspian Sea without too much environmental damage. That might be too much to ask for.
I guess the Europeans are catching on to what BRI is really about. It is just a railway from China to Europe. It is about getting all commerce in the world to flow through China. Building the infrastructure for that takes time. Western countries have spent decades slowly building up links between themselves and occasionally with each other. They are not used to stuff all running through China. Here is the key.
I will look into ports and maritime Silk Road next.
Meanwhile, the rail freight between China and Europe continue to do well. 10k freight so far this year.
They were at over 7k (up 2% YoY) in first half despite Russian/Ukraine conflict and China's lockdown. Indeed, the NILSTC through Chongqing saw 33% more traffic. That is huge for west china to ASEAN countries.
This talks about the Middle Corridor route that became popular after the Russian invasion. From what I can see, this is just a less efficient path right now due to more countries, the presence of passing through Caspian Sea and going through bosphorus straits. These will always be kind of problematic. I do wonder if they can build rail across Caspian Sea without too much environmental damage. That might be too much to ask for.
Aside from building railway/roads, there are other components to BRI. A good example of which is vocational training in partner countries.
There is already plenty of local training carried by Chines companies as discussed in this Carnegie endowment article. Basically, China needs to shift its role from just getting natural resources to also building sustainable local economy.
This recent article discussed the establishment of the first Luban workshop in Central Asia
I find it really interesting where the article speculates this to the second stage of BRI. Now that basic infrastructure is in place, the next step is to train people along BRI to be familiarized with Chinese technology and society. Get them to work with Chinese companies abroad. Looks like they are going to build 5 Luban workshops in Central Asia. That will train the locals to China's way of doing things and utilizing Chinese products. It looks like this level of training has never been provided by Western countries. As such, they are really welcomed
A while back, Carnegie endowment had a great article about Huawei's vocational training in Indonesia and its success in getting locals hooked onto Huawei products.
It shows that aside from government organized projects, China's private enterprises can also play a huge part in local vocational training. Again, this is up to large Chinese Technology companies to take this role forward.
Especially to a lot of countries in Africa that really thirsts for outside help to build their local economy that's more or less have been exploited for hundreds of years. I believe they have 12 such centers set up in Africa.
The bottom of this article is a great story from South Africa.
At this point, we are still at the very beginning of the process for a program like Luban. The first students have just graduated and bringing their knowledge to work force.
Something to keep our eyes on with respect to BRI.
There is already plenty of local training carried by Chines companies as discussed in this Carnegie endowment article. Basically, China needs to shift its role from just getting natural resources to also building sustainable local economy.
This recent article discussed the establishment of the first Luban workshop in Central Asia
I find it really interesting where the article speculates this to the second stage of BRI. Now that basic infrastructure is in place, the next step is to train people along BRI to be familiarized with Chinese technology and society. Get them to work with Chinese companies abroad. Looks like they are going to build 5 Luban workshops in Central Asia. That will train the locals to China's way of doing things and utilizing Chinese products. It looks like this level of training has never been provided by Western countries. As such, they are really welcomed
A while back, Carnegie endowment had a great article about Huawei's vocational training in Indonesia and its success in getting locals hooked onto Huawei products.
It shows that aside from government organized projects, China's private enterprises can also play a huge part in local vocational training. Again, this is up to large Chinese Technology companies to take this role forward.
Especially to a lot of countries in Africa that really thirsts for outside help to build their local economy that's more or less have been exploited for hundreds of years. I believe they have 12 such centers set up in Africa.
The bottom of this article is a great story from South Africa.
At this point, we are still at the very beginning of the process for a program like Luban. The first students have just graduated and bringing their knowledge to work force.
Something to keep our eyes on with respect to BRI.